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Fernando Ong vs Court of Appeals (1983) 124 SCRA 579

FACTS: It was alleged that Fernando Ong obtained and received from the Tramat Mercantile Inc several units of machineries in trust for the purpose of displaying and selling the machineries for cash, under the express obligation on the part of Ong of turning over to Tramat Mercantile the proceeds from the sale thereof within 90 days or immediately after demand. Ong allegedly failed to turn over the proceeds of the sale or to return the goods mentioned. Therefore, Tramat Mercantile filed a complaint against Ong. The parties entered into a compromise agreement to settle the claim in said civil case. Ong moved for the dismissal of the criminal charge of estafa on the ground of novation because of the compromise agreement entered into between him and the complainant.

ISSUE: whether or not novation will extinguish Ongs criminal liability if the crime of estafa had been completed

HELD: No. The crime of estafa had been consummated long before the compromise settlement was agreed upon. In fact, the criminal case had already been filed in the court. Therefore, the subsequent agreement did not affect the criminal liability of Ong.

Vintola vs Insular Bank of Asia and America 150 SCRA 578

FACTS: Spouses Tirso and Loreta Vintola, doing business under the name and style Dax Kin International, engaged in the manufacture of raw sea shells into finished products, applied for and were granted a domestic letter of credit by the Insular Bank of Asia and America (IBAA). The letter of credit authorized the bank to negotiate for their account drafts drawn by their supplier, Stalin Tan, on Dax Kin International for the purchase of puka and olive shells. Having received from Stalin Tan the puka and olive shells, the Vintolas executed a Trust Receipt Agreement with IBAA. The Vintolas defaulted with their obligation which prompted IBAA to demand for payment. The spouses take the position that their obligation has been extinguished, through no fault on their own; they were unable to dispose the sea shells.

ISSUE: whether or not the liability of Vintolas was extinguished

HELD: NO. The obligation of the Vintolas was not extinguished because IBAA did not become the real owner of the goods. It was merely the holder of a security of title for the advances it had made to the Vintolas. The trust receipt arrangement did not convert IBAA into an investor, the latter remained as lender and creditor.

Trinidad Ramos vs Court of Appeals 153 SCRA 135

FACTS: Trinidad Ramos applied for and was granted by the Philippine National Cooperative Bank (PNCB) four letters of credit. Commercial invoices of the different suppliers of the merchandise were also filed. The different suppliers then drew sight drafts against the applicant payable to the order of PNCB. PNCB then drew its own drafts against Trinidad Ramos as the buyer of the merchandise. After such acceptance, four trust receipts were signed by Trinidad Ramos. No payments were made excepting a partial payment. For her failure to comply with the trust receipt obligation, she was charged with estafa.

ISSUE: whether or not Ramos is liable for violation of Article 315 of the Revised Penal Code

HELD: No. Ramos contends that there was no proof that she received the goods. During the proceedings, what were presented are the invoices to prove the existence of the trust receipt agreement. However, such were just a list of items sought to be purchased and their prices. Also, the State insists that the marginal deposits on all the letters of credit will prove that Ramos received the goods. However, the only document presented by the prosecution was the Statement of Account of the accused. Lastly, PNCB indicated that the checks were given as payment. However, the encashed checks were never presented. Therefore, the prosecution failed to prove the guilt of Ramos.

Allied Banking Corporation vs Ordonez 192 SCRA 246 FACTS: Philippine Blooming Mills (PBM) thru its duly authorized officer, Alfredo Ching, applied for the issuance of commercial letters of credit with petitioner's Makati branch to finance the purchase of 500 M/T Magtar Branch Dolomites and one (1) Lot High Fired Refractory Sliding Nozzle Bricks. Allied Banking Corporation (ABC) issued an irrevocable letter of credit in favor of Nikko Industry Co., Ltd. (Nikko) by virtue of which the latter drew four (4) drafts which were accepted by PBM and duly honored and paid by the petitioner bank.:- nad To secure payment of the amount covered by the drafts, and in consideration of the transfer by ABC of the possession of the goods to PBM, the latter as entrustee, thru private respondent, executed four (4) Trust Receipt Agreements. Despite repeated demands, PBM failed and refused to either turn over the proceeds of the sale of the goods or to return the same. ABC filed a criminal complaint against private respondent for violation of PD 115 before the office of the Provincial Fiscal of Rizal. After preliminary investigation wherein private respondent failed to appear or submit a counter-affidavit and even refused to receive the subpoena, the Fiscal found a prima facie case for violation of PD 115 on four (4) counts.

ISSUE: whether or not the penal provision of PD 115 (Trust Receipts Law) apply when the goods covered by a Trust Receipt do not form part of the finished products which are ultimately sold but are instead, utilized/used up in the operation of the equipment and machineries of the entrustee-manufacturer?

HELD: Yes. It also covers those which does not form part of the finish products which are ultimately sold. Ching contends that PBM is not in the business of selling Magtar Branch Dolomites or High Fired Refractory Sliding Nozzle Bricks, it is a manufacturer of steel and steel products. But PBM, as entrustee under the trust receipts has, under Sec. 9 of PD 115, the following obligations, inter alia: (a) receive the proceeds of sale, in trust for the entruster and turn over the same to the entruster to the extent of the amount owing to him or as appears on the trust receipt; (b) keep said goods or proceeds thereof whether in money or whatever form, separate and capable of identification as property of the entruster; (c) return the goods, documents or instruments in the event of non-sale, or upon demand of the entruster; and (d) observe all other terms and conditions of the trust receipt not contrary to the provisions of said Decree. The trust receipts, there is an obligation to repay the entruster. Their terms are to be interpreted in accordance with the general rules on contracts, the law being alert in all cases to prevent fraud on the part of either party to the transaction. The entrustee binds himself to sell or otherwise dispose of the entrusted goods with the obligation to turn over to the entruster the proceeds if sold, or return the goods if unsold or not otherwise disposed of, in accordance with

the terms and conditions specified in the trust receipt. A violation of this undertaking constitutes estafa under Sec. 13, PD 115. In an attempt to escape criminal liability, private respondent claims PD 115 covers goods which are ultimately destined for sale and not goods for use in manufacture. But the wording of Sec. 13 covers failure to turn over the proceeds of the sale of entrusted goods, or to return said goods if unsold or disposed of in accordance with the terms of the trust receipts.

Philippine National Bank vs Pineda 197 SCRA 1

FACTS: Spouses Ignacio and Lourdes Arroyo obtained a loan from Philippine National Bank (PNB) for the purchase of 60% of the subscribed capital stock of the Tayabas Cement Company (TCC). As security to the loan, the Arroyos executed a real estate mortgage over a parcel of land. TCC filed with PNB an application for the 8-year deferred letter of credit in favor of Toyo Menka to cover the importation of cement plant machinery and equipment. The imported goods arrived and were released to TCC under a trust receipt agreement. Pursuant to the trust receipt agreement, PNB notified TCC of its intention to repossess the imported goods for its failure to settle the obligation.

ISSUE: whether or not TCCs liability has been extinguished by the repossession of PNB of the imported materials

HELD: No, TCCs obligation was not extinguished. The said repossession of the machinery and equipment in question was merely to secure payment of TCCs obligation and not for the purpose of transferring ownership.

People vs Nitafan 207 SCRA 726

FACTS: Betty Sia Ang, proprietress of Eckart Enterprises, received in trust from Allied Banking Gordon plastics, plastic sheeting and Hook Chromed. Ang failed to comply with her obligation under the trust receipt despite repeated demands from the Allied Banking. Thereafter, the bank filed a complaint against Betty Sia Ang for estafa.

ISSUE: whether or not an entrustee who fails to deliver the proceeds of the sale or to return the goods if not sold to the entruster-bank is liable for the crime of estafa

HELD: Yes. Failure to deliver the proceeds of the sale or to return the goods if not sold constitutes a criminal offense not only to the other, but more to the public interest. The law punishes dishonesty and abuse of confidence in handling the money and goods.

Prudential Bank vs National Labor Relations Commission 251 SCRA 421

FACTS: Interasia Container Industries was embroiled in 3 labor cases. With the finality of the decisions, writ of executions were issued. The sheriff levied on execution personal properties located in the factory of Interasia. Prudential Bank filed an Affidavit of Third Party claim asserting ownership over the seized goods on the strength of the trust receipt executed by Interasia in its favor. The bank raises issue on the extent of security title over the properties subject of the levy on execution, submitting that while it may not have absolute ownership over the properties, still it has the right, interest and ownership consisting of a security title which attaches to the properties. Prudential Bank trust receipt, which is a security for the payment of the obligations of the importer, from a mortgage executed as security for the payment of an obligation of a borrower. However, NLRC disregarded the Third Party Claim filed by Prudential Bank.

ISSUE: whether or not NLRC committed grave abuse of discretion in disregarding the third party claim of Prudential Bank

HELD: Yes. The law warrants the validity of Prudential Banks security interest in the goods pursuant to the written terms of the trust receipt as against all creditors of the trust receipt agreement.

Metropolitan Bank and Trust Company vs Tonda 338 SCRA 254

FACTS: Spouses Tonda applied for letter of credit with Metrobank in connection with the importation of raw textiles materials to be used in the manufacturing of garments. The spouses executed eleven (11) trust receipts tp secure the release of the materials. Due to failure to settle their obligations under the trust receipt agreement, Metrobank made a demand from the Tondas. The Bank alleged that the Tondas violated PD 115 in relation to Article 315 (1) (b) of the Revised Penal Code.

ISSUE: whether or not Spouses Tonda violated violated PD 115 in relation to Article 315 (1) (b) of the Revised Penal Code

HELD: Yes, they failed to comply with their obligation. The 2.8 M was not directly paid to the Metrobank to settle the trust receipt accounts, but deposited in a joint account of Joaquin Tonda and one Wang Tien En. Also, the handwritten note by the officer acknowledging receipt of the checks has made no reference to the Tondas obligation.

Colinares vs Court of Appeals 339 SCRA 609

FACTS: Petitioners Melvin Colinares and Lordino Veloso were contracted by the Carmelite Sisters for the renovation of their convent. Petitioners obtained SF solatone acoustical board, wood tiles, economy tiles and two (2) gallons of cement adhesive from CM Builders. They applied for a commercial letter of credit with Philippine Banking Corporation (PBC). Likewise, a trust receipt was executed as security. Petitioners failed to comply with their obligation under the trust receipt. As a result, they were charged for violation of PD 115 in relation to Article 315 (1) (b) of the Revised Penal Code. However, petitioners insisted that the transaction was a loan as per verbal guarantee of PBCs former manager.

ISSUE: whether or not the transaction was a loan or trust receipt

HELD: The transaction was a loan. Ownership of the merchandise was already transferred to Petitioners who were to use the materials for the construction. It was only a day later that they applied for a loan. The Trust Receipt s Law does not seek to enforce the payment for the loan, rather it punishes dishonesty and abuse of confidence in the handling of money or goods to the prejudice of another. There was neither dishonesty nor abuse of confidence on the part of petitioners. They continually endeavored to meet their obligations with PBC.

Consolidated Bank and Trust Corp. vs Court of Appeals 356 SCRA 671

FACTS: Continental Cement Corporation (CCC) and Gregory Lim obtained a letter of credit from Consolidated Bank. On the same day, CCC made a marginal deposit. The letter of credit was used to purchase 500,000 liters of bunker fuel of Petrophil Corporation. In relation to the same transaction, a trust receipt was executed by CCC, with Lim as signatory. Claiming that CCC and Lim failed to turn over the goods covered by the trust receipt or the proceeds thereof, Consolidated Bank filed a complaint for sum of money. In answer to the complaint, CCC and Lim averred that the transaction between them was a simple loan and not a trust receipt transaction.

ISSUE: whether or not the transaction was a loan or a trust receipt

HELD: The transaction was a loan. The goods were received long before the trust receipt itself was entered into. Prior to the date of execution of the trust receipt, ownership of the goods were already transferred to the debtor.

Philippine Bank of Communication vs CA and Filipinas Textile Mills 352 SCRA 617

FACTS: Philippine Bank of Communication (PBC) filed a complaint against Bernardino Villanueva and Filipinas Textile Mills. It sought payment representing the proceeds or value of various textile goods. The purchase of which was covered by letter of credit and trust receipts executed by PBC with Filipinas Textile Mills. However, Bernardino Villanueva and Filipinas Textile Mills countered that they already made payments on the amount demanded. PBC filed a Motion for Attachment, contending that violation of the trust receipts law constitutes estafa thus providing ground for the issuance of preliminary attachment. PBC claimed that attachment was necessary since Bernardino Villanueva and Filipinas Textile Mills were disposing of their properties to its detriment as a creditor. The lower court issued a preliminary attachment. On appeal, the Court of Appeals ruled that the lower court was guilty of grave abuse of discretion in not conducting a hearing on the application for a preliminary attachment.

ISSUE: whether or not the lower court was guilty of grave abuse of discretion in not conducting a hearing on the application for a preliminary attachment

HELD: While the motion refers to the transaction complained of as involving trust receipt, the violation of the terms of which is qualified by law as constituting estafa, it does not follow that a writ of attachment can and should be automatically issued. PBC cannot insist that Bernardino Villanueva and Filipinas Textile Mills failed to remit the proceeds of the sale or return the same is sufficient for the attachment to be issued. Bernardino Villanueva and Filipinas Textile Mills claimed that they made payments and they even refuted the allegation of fraud on their part. These matters should have been addressed in a preliminary hearing to guide the lower court to judicious exercise of its discretion regarding the prayed attachment.

South City Homes, Inc vs BA Finance Corporation 371 SCRA 603

FACTS: Fortune Motors Corporation (FMC) has been availing of the credit facilities of BA Finance Corporation. A Continuing Suretyship Agreement was executed in favor of BA Finance. Likewise, there are two (2) additional Continuing Suretyship Agreement executed in favor of BA Finance to discharge FMCs indebtedness to BA Finance. Subsequently, CARGO drew six (6) drafts in its favor, charged to the account of FMC. FMC, thereafter, executed trust receipts covering the motor vehicles delivered to it by CARGO under which it agreed to remit to CARGO the proceeds of the sale and immediately surrender the remaining unsold goods. The drafts and trust receipts were assigned to BA Finance. Upon failure of FMC to pay the amounts due under the drafts and to remit the proceeds of motor vehicles sold or to return those remaining unsold in accordance with the terms of the trust receipt agreement, BA finance sent a demand letter to petitioners.

ISSUES: a) Whether or not there was a novation of the obligation so as to extinguish the liability of the sureties b) Whether BA Finance had a valid cause of action for a sum of money following the drafts and trust receipt transactions

HELD: a) Petitioners posit that a novation, as a result of the assignment of the drafts and trust receipts by creditor CARGO in favor of BA Finance without the consent of FMC, extinguished their liabilities. What the law requires in an assignment is not the consent of the debtor but merely notice to him. A creditor therefore may assign his credit and its accessories without the debtors consent. Consequently, petitioners obligations were not extinguished. b) Petitioners claim that as an entruster, BA Finance must first demand the return of the unsold vehicles from FMC, pursuant to the terms of the trust receipts. Having failed to do so, petitioners had no cause of action against FMC and the action for collection of sum of money was premature. The Court held that in the event of default by the entrustee on his obligation under the trust receipt agreement, it is not absolutely necessary that the entruster cancel the trust and take possession of the goods to be able to enforce his rights thereunder. The law gives the entruster the discretion to avail of such right or seek any alternative action at any time.

Lee vs Court of Appeals 375 SCRA 576

FACTS: Petitioner Charles Lee, as President of MICO, wrote Philippine Bank of Communications (PBCom) for a grant of a discounting loan and credit line for the purpose of carrying out MICOs line of business as well as to maintain its volume of business which was secured by a real estate mortgage. In line with the transactions of MICO, it also obtained several letters of credit which were secured by trust receipts. Upon maturity of all credit availments obtained by MICO from PBCom, the latter demand for payment. However, petitioners denied any liability. They denied all the allegations of the complaint filed by PBCom. The trial court ruled in favor of petitioners wherein it held that PBCom failed to adequately prove that the proceeds of the loans were ever delivered to MICO. On appeal, the Court of Appeals reversed the ruling of the trial court saying that the latter committed erroneous application of the rules governing the burden of proof. The Court of Appeals said that while the subject promissory notes and letters of credit issued by PBCom made no mention of delivery of cash, it is presumed that said negotiable instruments were issued for valuable consideration.

ISSUE: whether or not the proceeds of the loans and letters of credit transactions were ever delivered to MICO

HELD: Yes, the proceeds were delivered to MICO. Letters of credit and trust receipts are not negotiable instruments. However, drafts issued in connection with the letters of credit are negotiable instruments. The drafts signed by the suppliers/beneficiaries in connection with the letters of credit proved that said suppliers were paid by PBCom for the account of MICO.

Pilipinas Bank vs Ong 387 SCRA 37

FACTS: Baliwag Mahogany Corporation (BMC), through its President, Alfredo Ong, applied for a domestic letter of credit with Pilipinas Bank to finance the purchase of a dark red lauan sawn lumber. To secure payment, BMC executed two (2) trust receipts. However, BMC failed to comply with the trust receipt agreement. It filed with the Securities and Exchange Commission (SEC) a Petition for Rehabilitation and for a Declaration in a State of Suspension Payments. After BMC informed its creditors, including Pilipinas Bank, of the filing of the petition, a Creditors Meeting was held to inform all the creditor banks of the present status of BMC anf to reach a common course of action to restore the company to sound financial footing. The SEC issued an order creating a Management Committee which would take custody and control of BMCs existing assets and liabilities. Then BMC and its creditor banks entered into a Memorandum of Agreement (MOA) rescheduling the payment of BMCs existing debts. However, BMC and Ong defaulted in the payment of their obligation under the rescheduled payment scheme provided in the MOA. Thus, the bank filed a complaint charging Ong and Leoncia Lim (as president and treasurer of BMC) with violation of the Trust Receipts Law.

ISSUE: whether or not Alfredo Ong and Leoncia Lim can be held liable for violation of the Trust Receipts Law

HELD: No. No dishonesty or abuse of confidence can be attributed to BMC. Record shows that BMC failed to comply with its obligation due to serious liquidity problems prompting it to file a Petition for Rehabilitation. The Management Committee that was created by SEC took custody of all BMCs assets and liabilities, including the subject dark red lauan sawn lumber. Clearly, it was the Management Committee which could settle BMCs obligation. In this case, the MOA novated the trust receipt agreement and effectively extinguished BMCs obligation under the trust receipt agreement. The MOA did not only reschedule BMCs debt, but more importantly, it provided principal conditions which are incompatible with the trust agreement.

Sarmiento vs Court of Appeals 394 SCRA 315

FACTS: Petitioners Antonio Apostol and Gregorio Limpin, Jr., doing business under the name of Davao Libra Industrial Sales, filed an application for an irrevocable letter of credit with Association Banking Corporation in favor of LS Parts Hardware and Machine Shop for the purchase of assorted scrap irons. The Bank issued the letter of credit. Thereafter, a trust receipt was executed by Limpin and Apostol. Such trust receipt was signed by Lorenzo Sarmiento. However, Apostol and Limpin failed to comply with their obligation which prompted the Bank to make demands. Apostol and Limpin claim that they cannot be held liable as the 825 tons of assorted scrap iron were lost when the vessel transporting such goods sunk. The lower court and the Court of Appeals ruled in favor of the Association Banking Corporation. Petitioners claim that the banks right to institute separately the civil action for the recovery of civil liability is already barred on the ground that the same was not expressly reserved in the criminal action which was filed.

ISSUE: whether or not Association Bank Corporation may still file a separate civil action

HELD: Yes. The Banks complaint against petitioners was based on their failure to comply with their obligation under the Trust Receipt executed by them. This breach of obligation is separate and distinct from any criminal liability for misuse and/o misappropriation of goods or proceeds realized from the sale of goods, documents or instruments released under the trust receipts, punishable under the Trust Receipt Law in relation to Article 315 (1) (b) of the Revised Penal Code. Being based on an obligation ex contractu and not ex delicto, the civil action may proceed independently of the criminal proceedings.

Ong vs Court of Appeals (2003) 401 SCRA 648

FACTS: Edward Ong, representing ARMAAGRI International Corporation, received in trust from SOLIDBANK 10,000 bags of urea specified in the trust agreement and covered by a letter of credit in favor of Fertiphil Corporation. Despite repeated demands made upon Ong, he is still failed to comply with his obligation under the trust receipt. A complaint was filed against Ong for estafa. However, he insisted that he is only a mere agent of the company therefore he is not liable.

ISSUE: whether or not Edward Ong may be held liable

HELD: Yes. Edward Ong is a person responsible for the violation of the Trust Receipts Law. The law recognizes the impossibility of imposing the penalty of imprisonment on a corporation. Hence, if the entrustee is a corporation, the Trust Receipts Law makes the officers, employees or the other persons responsible for the offense to suffer the penalty of imprisonment. In this case, Ong was the signatory of the trust receipt, he did not even explain or show why he is not responsible and he was aware of the terms and conditions of the trust receipt.

Landl & Company Inc. vs Metropolitan Bank (Metrobank) 435 SCRA 639

FACTS: Landl & Company (Landl) is engaged in the business of selling imported welding rods and alloys. It opened a letter of credit with Metrobank. It was evidenced by an invoice. To secure the indebtedness of Landl, the bank required the execution of a trust receipt. Upon arrival of the goods, Landl took possession and custody thereof. Landl defaulted payment of its obligation to the bank and failed to turn over the goods. Then the goods were sold at public auction. However, there had been deficiency which prompted Metrobak to institute a claim for sum of money against Landl and its directors.

ISSUE: whether or not Metrobank has the right to recover the deficiency

HELD: Yes. It is within its rights to institute the instant action. The right of repossession and subsequent sale at public auction which were availed by Metrobank were the rights available upon default on the part of Landl to comply with its obligation under the trust receipt and the Trust Receipts Law. Also, the initial repossession by the bank of the goods did not result in the full satisfaction of Landls obligation.

Rosario Textile Mills Corp. vs Home Bankers Savings and Trust Company 462 SCRA 88

FACTS: Rosario Textile Mills Corp. (RTMC) applied from Home Banks Savings and Trust Company (Bank) for an Omnibus Credit Line for P10 million. The Bank approved RMTCs credit line but only for P8 million. . The bank notified RTMC of the grant of the said loan thru a letter which contains terms and conditions conformed by RTMC thru Edilberto V. Yujuico. Yujuico signed a Surety Agreement in favor of the bank, in which he bound himself jointly and severally with RTMC for the payment of all RTMCs indebtedness to the bank from 1989 to 1990. RTMC availed of the credit line by making numerous drawdowns, each drawdown being covered by a separate promissory note and trust receipt. RTMC, represented by Yujuico, executed in favor of the bank a total of eleven (11) promissory notes. Despite the lapse of the respective due dates under the promissory notes and notwithstanding the banks demand letters, RTMC failed to pay its loans. Hence, the bank filed a complaint for sum of money against RTMC and Yujuico. In their answer, RTMC and Yujuico contend that they should be absolved from liability. They claimed that although the grant of the credit line and the execution of the suretyship agreement are admitted, the bank gave assurance that the suretyship agreement was merely a formality under which Yujuico will not be personally liable. They argue that the importation of raw materials under the credit line was with a grant of option to them to turn-over to the bank the imported raw materials should these fail to meet their manufacturing requirements. RTMC offered to make such turn-over since the imported materials did not conform to the required specifications. However, the bank refused to accept the same, until the materials were destroyed by a fire which gutted down RTMCs premises. RTMC and Yujuico, herein petitioners, contends that under the trust receipt contracts between the parties, they merely held the goods described therein in trust for respondent Home Bankers Savings and Trust Company which owns the same. Since the ownership of the goods remains with the bank, then it should bear the loss. With the destruction of the goods by fire, petitioners should have been relieved of any obligation to pay.

ISSUES: (a) whether petitioners are relieved of their obligation to pay their loan after they tried to tender the goods to the bank which refused to accept the same, and which goods were subsequently lost in a fire; (b) whether petitioners are solidarily liable for the payment of their obligations to the bank

HELD: (a)Petitioners theorize that when petitioner RTMC imported the raw materials needed for its manufacture, using the credit line, it was merely acting on behalf of the bank, the true owner of the goods by virtue of the trust receipts. Hence, under the doctrine of res perit domino, the bank took the risk of the loss of said raw materials. When the warehouse and its contents were gutted by fire, petitioners obligation to the bank was accordingly extinguished. It is thus clear that the principal transaction between petitioner RTMC and the bank is a contract of loan. RTMC used the proceeds of this loan to purchase raw materials from a supplier abroad. In order to secure the payment of the loan, RTMC delivered the raw materials to the bank as collateral. Trust receipts were executed by the parties to evidence this security arrangement. Simply stated, the trust receipts were mere securities. To consider the bank as the true owner from the inception of the transaction would be to disregard the loan feature thereof. Thus, petitioners cannot be relieved of their obligation to pay their loan in favor of the bank.

(b) Petitioner Yujuico contends that the suretyship agreement he signed does not bind him, the same being a mere formality. However, there is no record to support his allegation that the surety agreement is a mere formality; and second, as correctly held by the Court of Appeals, the Suretyship Agreement signed by petitioner Yujuico binds him. The terms clearly show that he agreed to pay the bank jointly and severally with RTMC.

Tupaz IV vs Court of Appeals 475 SCRA 399

FACTS: Petitioners Jose Tupaz and Petronila Tupaz were officers of El Oro Engraver Corporation (El Oro). El Oro has a contract with the Philippine Army to supply the latter with survival bolos. To finance the purchase of the raw materials for the bolos, on behalf of El Oro, petitioners applied with Bank of Philippine Islands (BPI) for two (2) commercial letters of credit. Simultaneous with the issuance of letters of credit, petitioners executed trust receipts in favor of BPI. Jose Tupaz signed, in his personal capacity, the 1st trust receipt. On the other hand, the 2nd trust receipt was signed the by both petitioners in their capacities as officers of the company. However, petitioners failed to comply with their undertaking under the trust receipts. BPI made several demands but El Oro made partial payments only. PBI then charged petitioners with estafa under Section 13 of PD 115.

ISSUE: whether or not petitioners bound themselves personally liable for El Oros debts under the trust receipt

HELD: In signing the 2nd trust receipt, petitioners did not bind themselves personally liable for El Oros obligation. However, with regard to the 1st trust receipt, Jose Tupaz signed alone that he did so in his personal capacity. Hence, Jose Tupaz bound himself personally liable under such trust receipt.

DBP vs Prudential Bank 475 SCRA 627

FACTS: Lirag Textile Mills (LITEX) opened an irrevocable letter of credit with Prudential Bank. This was in connection with its importation of 5,000 spindles for spinning machineries with drawing frame, simplex fly frame, ring spinning frame and various accessories, spare parts and tool gauge. A foreign currency loan was granted to LITEX by DBP. To secure the said loan, LITEX executed real estate and chattel mortgages. Among the machineries and equipments mortgaged in favor of DBP were articles covered by the trust receipt. Prudential Bank learned about DBPs plan for overall rehabilitation of LITEX so it notified DBP of its claim over the various items covered by the trust receipts which had been installed and used by LITEX in the textile mill. For failure of LITEX to pay its obligation, DBP extrajudicially foreclosed on the mortgages, including the articles claimed by Prudential Bank.

ISSUE: whether or not the disputed articles were not proper objects of a trust receipt

HELD: Applying the provisions of PD 115, the ownership over the contested articles belongs to Prudential Bank as entrustor, and not to LITEX. While LITEX was allowed to sell the items, it had no authority to dispose of them through conditional sale, pledge of other means. LITEX had neither absolute ownership nor free disposal. LITEX could not have been subjected the goods to a chattel mortgage.

Ching vs Secretary of Justice 481 SCRA 609

FACTS: Philippine Blooming Mills Inc. (PBMI), through its Senior Vice President Alfredo Ching, applied with the Rizal Banking Corporation (RBC) for the issuance of commercial letters of credit to finance its importation of assorted goods. The goods were purchased and delivered in trust to PBMI. Ching signed the 13 trust receipts as surety. When the trust receipts matured, Ching failed to return the goods to RBC, or to return their value despite demands. Thus, RBC filed a criminal complaint for estafa. When the case reached the Department of Justice, the Secretary of Justice issued a resolution dismissing the case where the petitioner, as Senior Vice-President of PBMI, executed the 13 trust receipts and as such, was the one responsible for the offense. Thus, the execution of said receipts is enough to indict the petitioner as the official responsible for violation of P.D. No. 115. The Justice Secretary also declared that petitioner could not contend that P.D. No. 115 covers only goods ultimately destined for sale, as this issue had already been settled in Allied Banking Corporation v. Ordoez, where the Court ruled that P.D. No. 115 is "not limited to transactions in goods which are to be sold (retailed), reshipped, stored or processed as a component of a product ultimately sold but covers failure to turn over the proceeds of the sale of entrusted goods, or to return said goods if unsold or not otherwise disposed of in accordance with the terms of the trust receipts."

ISSUE: whether or not the secretary of justice correctly ruled that petitioner Alfredo Ching is the officer responsible for the offense charged and that the acts of petitioner fall within the ambit of violation of P.D. [no.] 115 in relation to article 315, par. 1(b) of the revised penal code.

HELD: There is no dispute that it was the respondent, who as senior vice-president of PBM, executed the thirteen (13) trust receipts. As such, the law points to him as the official responsible for the offense. Since a corporation cannot be proceeded against criminally because it cannot commit crime in which personal violence or malicious intent is required, criminal action is limited to the corporate agents guilty of an act amounting to a crime and never against the corporation itself. Thus, the execution by respondent of said receipts is enough to indict him as the official responsible for violation of PD 115. In this case, petitioner signed the trust receipts in question. He cannot, thus, hide behind the cloak of the separate corporate personality of PBMI. In the words of Chief Justice Earl Warren, a corporate officer cannot protect himself behind a corporation where he is the actual, present and efficient actor.

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